Parvinder Singh (Now Deceased) vs Bhai Hospital Trust And Ors.
2002 Latest Caselaw 1091 Del

JUDGMENT

1. The order passed on 18th January, 2002 by learned Single Judge deciding two preliminary issues is under challenge in this appeal by defendants 1 and 2. The two issues decided by the impugned order as preliminary issues read:

(1) Whether the suit is barred and/or is liable to be stayed under the provisions of Section 32 of the Arbitration Act?

(2) Whether the suit is barred by principles of res judicata in view of the award dated 24.5.1984.

2. Learned Single Judge decided both the issues in favor of the plaintiffs holding that the suit in the present form is not barred under Section 32 of the

Arbitration Act and is not liable to be stayed and that the award of the arbitrator which was made rule of the court culminating in a decree does not operate as res judicata so as to bind the plaintiffs vis a vis the nature of the suit that has been filed.

3. In October, 1993 S.No.2428/93 was filed by (1) Bhai Hospital Trust; (2) Dr. Bhai Mohan Singh, the Managing Trustee of the Trust; (3) Sardar Jaswant Singh and (4) Mr. S.C. Chhabra as plaintiffs against (1) Dr. Parvinder Singh, Chairman and Managing Director, Ranbaxy Laboratories Limited; (2) Malvinder Mohan Singh; (3) Rana Ranbir Singh Grewal; (4) Mr. Gurpreet Singh Sodhi; (5) Ranbaxy Laboratories Ltd. and (6) Mr. Jagdish Anand. It was alleged that plaintiff No. 2 is the founder of some public and private trusts including plaintiff No. 1 Trust, which was created by and under trust deed dated 8.10.1979. Plaintiffs 2 and 4 and defendant No.6 are the first trustees of the Trust. Plaintiff No. 3 was appointed as an additional trustee. Plaintiff No. 2 was also empowered by the trustees to act as the Managing Trustee and he continued to manage the affairs of the Trust from its inception.

4. It was alleged in the plaint that plaintiff No. 2 was Chairman and Managing Director of Ranbaxy and as a measure of convenience all records relating to the Trust were being maintained under his supervision and control at the head office of Ranbaxy. Defendant No. 1 is the son of plaintiff No. 2 and defendant No. 2 is the son of defendant No. 1. The plaint thus makes reference to the disputes, which has arisen amongst family members and about family settlements which are stated to have been arrived at under which defendant No. 1 and his family were to have eventual management, control and ownership of the shares of Ranbaxy held by the larger family. Plaintiff No. 1 Trust holds over one lakh share in Ranbaxy and in the family settlement the said shares figures in the second schedule. Eventual control thereof was ultimately to be transferred to defendant No. 1 and his family group in due course. The plaint has also referred to the arbitration proceedings, which commenced with effect from 12.8.1992 relating to the question whether defendant No. 1 had failed to carry out his obligations under the family settlements with regard to his duties and obligations under the overall supervision and control of plaintiff No. 2 there by violating the very basic structure of the family settlement and that whether the control of the Holding Companies made over to the first defendant should not revert back to plaintiff No. 2. It is further been averred in the plaint that on 30.3.1993 plaintiff No. 2, in his capacity as a Managing Trustee caused a notice of meeting of the Trustees to be issued under his orders convening the meeting for 2.4.1993. A copy of the notice was endorsed to one Mr. Bhutani, an officer of Ranbaxy under whom the records of the Trust were being maintained under the direction and supervision of plaintiffs 2 and 3 requesting Mr. Bhutani to be present at the time of meeting with certain records. Plaintiffs 2 and 3 and defendant No. 6 were surprised to receive a letter dated 31.3.1993 signed by Mr. Arun Bhalla, the Executive Secretary to defendant No. 1 wherein it was stated that the notice issued by plaintiff No. 2 for the meeting to be held on 2.4.1993 was unauthorised, illegal and malafide inter alia on the ground that defendant No. 1 was the Managing Trustee and he had not authorised anybody to convene the meeting; the notice had not been sent to defendants 2 to 4 who were the trustees of the Trust; and that the notice had been sent to plaintiff No. 4 who was no longer a trustee. The said letter further stated that assembly of two or more persons on 2.4.1992would not constitute meeting of the trustees and the meeting would be bad in law. The plaintiffs thus asserted that no other trustee other than the original trustees, namely, plaintiffs 2 and 3 and defendant No. 6 and subsequently appointed trustee, namely, plaintiffNo. 3 were ever appointed at any stage nor was any meeting of the trustees ever called or held or any resolution passed for such purpose. Defendant No. 1 was not even a trustee, let alone the Managing Trustee. Defendants 2 to 4 had also not been appointed as trustees. Plaintiffs further alleged that defendant No. 1 in fact was misusing his dominant position as a Chairman and Managing Director of defendant No. 5 company, in order to deprive the lawful trustees of the Trust of the assets and records of the Trust. Consequently the plaintiffs prayed for passing the following decree in the suit:-

(a) a declaration in favor of the plaintiff and against the defendants 1 to 4 declaring that none of the defendants 1 to 4 were ever lawfully appointed as trustees of Bhai Hospital Trust and have no lawful right or authority to seek to act as such and that the plaintiffs No. 2 to 4 and the defendant No. 6 are the only lawful trustees of Bhai Hospital Trust;

(b) Permanent prohibitory injunction against the defendants 1 to 4 restraining them in any manner intermeddling or interfering with the affairs and assets of the Bhai Hospital Trust or from imposing the effective control and management thereof by the plaintiff No. 2 to 4 and defendant No. 6;

(c) mandatory injunction against the defendants No. 1 and 5 requiring them to forth with make over to the plaintiffs No. 2 to 4 and defendant No. 6 all the share certificates relating to shares owned by the Bhai Hospital Trust in the defendant No.5 company;

(d) mandatory injunction against the defendant No. 1 requiring him to make over to the plaintiffs 2 to 4 and defendant No. 6 all the records including Attendance Registers, Minutes Books, Bank Accounts records, cheque books, taxation records, correspondence relating or belonging to the Bhai Hospital Trust.

5. Defendants/appellants in the written statement pleaded that pursuant to the family settlement dated 19.1.1991 defendant No. 1 was already a trustee of the Trust and became its Managing Trustee and defendants 2, 3 and 4 were inducted as the additional trustees. It has also been pleaded that plaintiff No. 2 along with others had resigned as trustees. Disputes had arisen between plaintiff No. 2 and defendant No. 1 pertaining to the family settlement and the alleged breaches, which were referred to the sole arbitration of Justice E.S. Venkataramiah, who on 24.5.1994 had made his award, which ultimately was made rule of the Court on 6.12.1995. In view of the award, which had been made rule of the court and decree was drawn there on the suit of the plaintiff was not maintainable and will be barred under Section 32 of the Arbitration Act, 1940 in as much as the prayers sought in the suit by plaintiffs amount to contesting the award thereby nullifying the effect thereof and in any case suit would be parred by the principles of res judicata.

6. Admittedly plaintiff No.1, 3 and 4 and the defendants other than defendant No. 1 were not parties to the family settlement, arbitration proceedings, the award or the decree. Para 17 of the award of the arbitrator records that only two of the 20 parties to the Memorandum of Family Settlement are parties to the arbitration proceedings and they are Bhai Mohan Singh and Dr. Parvinder Singh, representing the two branches of Bhai Manjit Singh and Analjit Singh. The other two sons of Bhai Mohan Singh are not parties. Smt. Avtar Singh was also not a party. No Company, Firm or Trust referred to in the second schedule of the memorandum of settlement, nearly 55 in number including other Companies and Firms, referred to at item No. 28 of the second schedule are parties to the arbitration awards. The entire arbitration proceedings were thus confined to the determination of disputes which had arisen between Bhai Mohan Singh (plaintiff No. 2) and Dr. Parvinder Singh (defendant No. 1). In this background the question arising for determination is as to whether the impugned order passed by the learned Single Judge is liable to be interfered with or not.

7. The learned Single Judge on a reference to various provisions of the Trust Act held that the trustees have certain rights. The scheme of the Trust Act clearly provide that trustees cannot divest the property of the Trust as such. The powers of the trustees cannot be abdicated and they have to take due course of the preservation of the property of the Trust. Once the law embarks upon the trustees some powers, which cannot be abdicated and the new trustees have to be appointed in accordance with the Trust Act or in accordance with the Trust deed necessarily a person can always challenge that certain persons, who claim themselves to be the trustees are not the trustees, which exactly is the scope of the present suit and, therefore, the same would not be barred under Section 32 of the Arbitration Act. Plaintiff No. 2 and defendant No.1 did not act as trustees in arbitration proceedings. They acted in their individual capacity. The capacity in which the present suit is filed is totally different and since plaintiffs No. 1, 3 and 4 were not even parties to the arbitration proceedings or to the family settlement they will not be bound by the award and Section 32 of the Arbitration Act will not be a bar from filing such a suit. On similar reasonings issue No. 2 was also decided in favor of the plaintiffs holding that in order to attract provisions of Section 11 of Code of Civil Procedure in the earlier decided suit the suit in question the parties should be common or they shall hold the same title. Since plaintiffs 3 and 4 were claiming themselves to be the trustees of plaintiff No. 1 Trust, they were not parties to the arbitration agreement, therefore, the award of the arbitrator or decree passed thereon will not operate as res judicata.

8. Learned counsel for the appellants urged that adjudication in the suit now instituted will reopen the issues and disputes, which stood decided by the award of the arbitration since decree was being sought in the instant suit with respect to Bhai Mohan Singh Trust and the shares of the Ranbaxy company held by the Trust. Reading of the entire plaint would suggest that the disputes in the real sense are between plaintiff No.2 and defendant No. 1 and since it was a family Trust created by plaintiff No.2, who was the founder of the Trust, the other trustees have no independent existence and cannot maintain the suit.

9. We have considered the submissions made at the bar but are not impressed with the submissions made and are of the view that no interference is called for in the well reasoned and elaborate order of the learned Single Judge.

10. Section 32 of the Arbitration Act, 1940 prevents a suit to challenge the existence of an arbitration agreement and setting aside, amending or modifying any arbitration agreement or award. It reads:-

"Bar to suits contesting arbitration agreement or award. - Notwithstanding any law for the time being in force, no suit shall lie on any ground, whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or an award, nor shall any arbitration agreement or award be set aside, amended, modified or in any way affected otherwise than as provided in this Act."

11. Section 32 aforementioned must be read with Section 33 of the Arbitration Act, 1940 which reads:-

"Arbitration agreement or award to be contested by application.- Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits:

Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit."

12. The net result of the bare reading of the aforementioned two provisions of Arbitration Act, 1940 is that where a party wants to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined he cannot proceed by means of a suit but must apply under the provisions of the Act. This bar not only applies to a party to the arbitration agreement but also to any person claiming under him.

13. Section 11 of the Code of Civil Procedure embodies the doctrine of res judicata or the rule of conclusiveness of prior judgment as to the points decided in other subsequent suit between the same parties or between the parties under whom they or any of them claim or, litigating under the same title. Any decision in a litigation between the parties will be binding on them and their privies, namely such parties under whom they are claiming or litigating under the same title. A person is said to claim under another, when he derives his title through the other by assignment or otherwise. When the predecessor in the previous suit, not being the same as that in which the successor claims in the subsequent suits it cannot be said that the later is claiming under the predecessor.

14. On reference being made to the award of the Arbitrator, admittedly the arbitration proceedings were between plaintiff No. 2 and defendant No. 1. Defendant No. 1 is not atrustee named in the Trust and was not so claiming in the arbitration proceedings. The arbitration proceedings were also not commenced by plaintiff No.2 for and on behalf of the Trust or as representing the Trust. Since neither the Trust was a party nor any other trustee was a party in the arbitration proceedings, no fault can be found with the reasonings of the learned Single Judge, who on reference being made to various provisions of the Trust Act came to the conclusions aforementioned. Chapter 7 of the Trust Act deals with the manner of vacating the office of a trustee. Method of appointment of new trustees is provided in Section 73 of the Act. A trustee has an independent entity distinguished from his individual capacity. Since plaintiffs 1, 3 and 4 were not parties either to the arbitration proceedings or the award or decree the learned Single Judge rightly held the suit not to be barred under Section 32 of the Arbitration Act or hit by the principles of res judicata. As such no interference is called for with the impugned order in this appeal which is hereby dismissed with costs quantified at Rs.10,000/-.